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The certiorari petition in Live Nation Entertainment, Inc. v. Heckman (No. 24-1145) explains that “[r]ecently, plaintiffs’ firms have exerted massive settlement pressure and overwhelmed arbitration providers by simultaneously filing thousands of materially identical arbitration claims.” This abusive tactic leverages massive liability for up-front filing fees under traditional arbitration arrangements, while simultaneously crippling arbitrators’ ability to adjudicate the underlying claims.
Case Background
Arbitration providers have responded by adopting new procedures designed to process mass filings fairly and efficiently. More specifically, the certiorari petition indicates that “Live Nation Entertainment, Inc. and Ticketmaster L.L.C. (together, “Live Nation”), amended their longstanding arbitration agreement to send disputes to a new arbitration provider, New Era ADR. New Era has adopted procedures for handling such mass arbitrations such as bellwether proceedings, coordinated discovery, and batching, along with a fee structure that ensures the feasibility of arbitration for companies and consumers alike.”
In the decision below, the Ninth Circuit “deemed New Era’s procedures unconscionable under California law and nullified the parties’ entire arbitration agreement.” The Ninth Circuit stated that “the FAA ‘simply does not apply’ to mass arbitration procedures that ‘did not exist in 1925,’ when Congress enacted the FAA.” The Supreme Court held in AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011), that the FAA preempts state-law rules that invalidate class-action waivers in consumer arbitration agreements, such as California’s Discover Bank rule. But the Ninth Circuit in Live Nation, by nullifying the arbitration agreement, essentially resurrected the Discover Bank rule as it applies to mass arbitration.
ALF has filed an amicus brief urging the Supreme Court to review the case. The brief was authored for ALF by Philip Sellinger, Dominic Draye, Adil Khan, Rebecca Zisek, and Jasmine Sharma of Greenberg Traurig, LLP.
ALF's Amicus Brief
ALF long has advocated for the primacy of the FAA. Its amicus brief explains that the Ninth Circuit’s opinion conflicts with fundamental FAA principles, such as the right of parties to contract freely, and fails to protect against the abuses of mass arbitration. The brief urges the Supreme Court to uphold contractual terms that not only provide for arbitration generally, but also avoid the potential for abuse by the plaintiffs’ bar.
ALF’s brief explains that since the FAA’s enactment, the Court has repeatedly acknowledged the strong interest in favor of enforcing arbitration agreements and has steadfastly enforced such agreements according to their terms. The brief discusses why consumers can be better off resolving disputes through arbitration than participating in class actions. Empirical assessments have shown that arbitration claimants have better odds of success than in litigation, receive higher net awards than in litigation, and receive awards quicker than in litigation. Many businesses have arbitration procedures in place to help consumers resolve disputes with relatively lower costs (with the businesses paying arbitration fees), and with fewer procedural hurdles.
Despite the benefits that arbitration provides to consumers, the plaintiffs’ bar has devised abusive mass arbitration tactics, e.g., the practice of filing hundreds—or even thousands or tens of thousands—of “cookie-cutter” arbitration demands against a single business to coerce mass settlements in lieu of paying substantial arbitration administrative fees, sometimes in the millions of dollars, and often without any regard to the merits of the individual claims.
Some businesses, like Live Nation, have tried to use thoughtful contracting to preserve arbitration. It has subscribed to the services of a new arbitration provider, which employs a procedure reminiscent of multidistrict litigation in which plaintiffs with similar cases are batched into groups of five or more, of which three “bellwether” cases create binding “precedent” for all other batched cases. In Live Nation, however, the Ninth Circuit found those streamlined procedures to be procedurally and substantively unconscionable.
ALF‘s brief highlights concerns that the plaintiffs’ bar will likely attempt to extend the Ninth Circuit’s analysis beyond its facts, arguing that arbitration agreements with mass arbitration procedures promoting efficiency and fairness—like bellwether proceedings, coordinated discovery, and batching—are not protected under the FAA and may be held unenforceable under state law. If accepted, that reasoning creates a slippery slope that may allow parties to sidestep class action waivers, pursue class proceedings despite their agreement to arbitrate, or exploit administrative procedures to extract unfair settlements in arbitration. ALF argues that businesses should be able to employ procedures that allow them to efficiently and fairly arbitrate disputes on the merits, without the threat of administrative costs being weaponized to extract unfair outcomes.
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